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It's a classic damned-if-you-do, damned-if-you-don't scenario. Faced with the twin threats of a severe flu season and the possibility of avian flu turning pandemic, employers must carefully balance their traditional policies of discouraging no-shows against the multiplier-effect costs of spreading infection. And as Carol Sladek, work-life consultant with Hewitt Associates, points out, "it's a very fine line."

Of course, no employer will admit to encouraging sick employees to work, though policies that penalize excess sick days can have that effect. But many are aware of "presenteeism": the growing phenomenon of snifflers and sneezers showing up at the office. In fact, a recent study by CCH Inc., a human-resources information provider, found that 48 percent of employers have recognized presenteeism as a problem, up from 39 percent in 2004.

In response, many companies have concluded that prevention is the best way to slash absenteeism. Some businesses, such as Bellevue, Wash.-based Coinstar Inc., for example, have long offered free flu shots. But this year, it seems more companies are recognizing that there is "a positive ROI in giving people flu shots," says Helen Darling, president of the National Business Group on Health. For example, Graham Corp., a Batavia, N.Y.-based manufacturer of industrial equipment, sponsored an on-site inoculation program this fall for the first time.

"The cost of the shot is de minimis," says CFO Ronald Hansen, estimating that inoculating 170 of the company's workers cost "a couple of thousand dollars." But while Hansen believes that the investment was well spent, he says the ROI can't be determined until he sees how many sick days are used this winter.

Other firms are making provisions to care for the children of sick employees so the employees can recover more quickly. Although just 34 percent of businesses with 5,000 or more employees provided on-site or near-site child care in 2004, says George Faulkner, a principal with Mercer Health and Benefits, many others are now contracting with outside agencies for emergency day care.

If the avian flu does turn pandemic, of course, such measures may prove ineffective. Corporate absentee policies may then be trumped by government-imposed quarantines. In the meantime, however, experts recommend that companies review their short-term-disability policies to see if they extend to pandemics, and formulate emergency-travel policies, such as requiring employees who are returning from abroad to stay home for several days. It's common sense, says Robert Wilkerson, global practice leader for corporate preparedness at Kroll Inc., that "anybody with a long supply chain with a lot of international travel and internationally produced goods will be more susceptible."

Whatever the intensity of the flu season, contingency planning is essential to keep business moving, says Dr. Brent Pawlecki, associate medical director at Pitney Bowes. A multidisciplinary team has been formed at the Stamford, Conn.-based company to formulate responses to an avian flu outbreak, such as customizing work-at-home options. After all, he says, "there is a difference between wanting employees to perform their work and wanting them to come to work." In this environment, he adds, common sense should rule. "If you're sick," he says, "don't come to work." — Norm Alster

Corporate PreparednessHow do companies regard a possible pandemic?

60%

Have not adequately planned to protect themselves.

40%

Believe an outbreak would adversely affect their businesses.

39%

Say there isn't much that companies can do to avoid it.

Source: Deloitte Center for Health Solutions

Park-n-Load

Legally speaking, companies have every right to prohibit employees from bringing guns to the workplace. Prohibiting them from bringing guns to the parking lot of the workplace...well, that appears to be another matter entirely.

In fact, lawmakers in several states are considering bills that would ban businesses from barring weapons in company parking lots. In Florida, proposed legislation would allow staffers to bring handguns to work — as long as the workers keep the weapons stowed in their cars. A Utah bill would curb an employer's ability to restrict the carrying of guns on company property.

If the proposals pass, Florida and Utah will join a growing number of states that have acted to limit the rights of employers on their premises. Over the past three years, lawmakers in Oklahoma, Minnesota, Alaska, and Kentucky have all approved bills making it legal for employees to store guns in cars parked on company property.

Not surprisingly, the laws have sparked a new round of debate between advocates of the right to bear arms and antigun groups. Backers of the bills say workers have a constitutional right to house weapons in their own vehicles. They also argue that the laws enable workers to protect themselves as they travel to and from work.

Many employers disagree, however, insisting that the laws hamper their ability to protect employees at work. There is strong evidence that guns and offices do not mix. Indeed, a recent study by a professor at the University of North Carolina found that homicides were about five times more likely to occur in workplaces where guns were permitted than in those that prohibited them. Overall, firearms were used in three-quarters of the workplace homicides that occurred in the United States in 2004, according to statistics from the Centers for Disease Control and Prevention. Says Dave Namura, government-relations manager for the Society for Human Resource Management: "These [pro-gun] laws place restrictions on an employer's ability to create a safe working environment."

Officers at some businesses have challenged the new laws in court. In 2004, ConocoPhillips Co. and Whirlpool Corp., among others, filed a suit in federal court seeking to overturn Oklahoma's law. But not all business leaders are up in arms. Charles Barton, finance manager of the Oklahoma Electric Cooperative in Norman, Okla., says his company's gun policy is pretty similar to what's in the new law. "As long as employees are carrying the guns legally in their vehicles," says Barton, "there's no objection." — Karen M. Kroll

Economists on Parade

As the 18-year reign of Federal Reserve chairman Alan Greenspan comes to an end this month, new chairman Ben Bernanke will inherit a daunting job. Fluctuating oil prices, inflation concerns, and a sagging housing market will surely test the new Fed chairman as he assumes the mantle.

For advice on how to handle the turbulence, Bernanke may want to turn to Flying on One Engine (Bloomberg Press, 2005). The book, a compilation of essays by 16 top market economists, is a comprehensive view of how global economics can roil markets.

Thomas Keene, who edited the book, says he conceived the compilation in part "for people who want to link the day-to-day battles of running businesses with a greater picture." And certainly the book addresses a number of pressing issues for finance chiefs, such as competition from developing markets in Asia.

While the essays in Flying on One Engine are insightful, the authors offer up no easy answers. Indeed, the views provide a glimpse of the contradictory opinions Bernanke will have to wade through. Case in point: the deficit. Bear Stearns's David Malpass doesn't seem overly concerned by the shortfall, writing of a "durable U.S. expansion." William Dudley and Edward McKelvey of The Goldman Sachs Group Inc. sound a slightly different note: "The United States has embarked on a set of policies that will make the deficit chronic and damage U.S. economic performance if left unchanged." — Kate O'Sullivan

Going Private

With commercial airlines flying into bankruptcy more frequently than flights arrive at O'Hare International, business travelers are increasingly looking for alternatives — in particular, jet-card programs and charter companies.

Six-year-old Weymouth, Mass.-based Sentient Jet Inc. is proof. The company, which books flights on 900 private jets for its several thousand subscribers, has increased membership by 85 percent in the last year. Hampton, N.H.-based Private Jet Services Group Inc., a charter service that specializes in groups ranging from 15 to 1,500 people, has seen 100 percent growth in each of the past four years, according to CEO Greg Raiff.

With more than 3,000 private-jet carriers and some 6,000 private airports (including 600 commercial airports) in North America, private air travel is not only convenient but also cost-effective, says Sue Swenson, team lead, travel and aviation, for natural-gas producer Encana Corp. In the first three quarters of 2005, the Calgary-based company flew 21,000 employees, two-thirds of them by corporate jet or charter. Swenson estimates that flying on commercial airlines adds about four hours to any trip and can cost an extra $125 per hour per executive in nonproductive paid time.

To use the services of a jet-card company like Sentient, businesses place about $100,000 in a flight-time bank account, which is debited as jet hours are used. Most private-flight-card and private-jet companies do not charge for extra passengers, allow reservations up to 10 hours before flight time, offer broadband on the plane, and fly from point to point without transfers.

A key benefit of the jet-card approach, says Sentient CEO Steve Hankin, is that "you're not tying up the capital you would if you bought a plane or invested in fractional air time." Joseph Appelbe, executive vice president of Subaru New England, points out that the plush ambiance of charter services is an added bonus. He sends 50 of his best dealers to the Caribbean for vacation each year, and recently turned to Private Jet Services instead of commercial flights. Appelbe says chartering a plane for the group saved him the hassle of coordinating commercial flights, and his employees were happier.

"They work harder because they want to go again," he says. "When you look at what you're trying to accomplish, chartering is well worth it." — Laura DeMars

The Backdating Games

Following a yearlong investigation, it appears the Securities and Exchange Commission is finally beginning to crack down on companies with questionable policies governing stock-option grants. In November, management at Analog Devices Inc. agreed to pay $3 million to settle an SEC investigation into the company's handling of stock-option awards. And three senior managers at software maker Mercury Interactive Corp. recently resigned after an SEC probe uncovered problems with the reporting of stock-option issuances. Published accounts say the commission is looking at about a dozen companies, and appears to be zeroing in on the backdating of grants.

The commission apparently became interested in the topic when academic research showed that the share price of scores of companies dropped just prior to the granting of options. The research also indicated that — surprise, surprise — share prices often rose immediately after the pricing of options. "Timing of option grants is a very systematic and widespread practice," says Patrick McGurn, an executive vice president of Institutional Shareholder Services Inc., in Rockville, Md. "But backdating is a whole other issue."

While backdating is not necessarily illegal, McGurn notes that it can lead to a welter of problems, including violation of securities laws. In the case of Mercury Interactive, an internal company investigation (triggered by the SEC probe) uncovered 49 instances of backdating of options during a 10-year period. Ultimately, three top executives at the Mountain View, Calif., company resigned, including CEO Amnon Landan and CFO Douglas Smith. While the two executives admitted they "benefited personally" from the manipulation of stock-option grant dates, both denied knowingly doing anything wrong.

It's uncertain just how common backdating of options has been. But Andrew Liazos, a partner at McDermott Will & Emery LLP in Boston, believes that accelerated reporting requirements now make backdating more difficult. Section 403 of the Sarbanes-Oxley Act now requires that directors and officers report option grants to the SEC within two business days, instead of weeks (or even months), as allowed under prior law. "For executives with these reporting requirements," says Liazos, "it's harder to see how backdating will occur [now]." — L.D.

Are Disputes Worth It?

The old adage that the customer is always right is true — at least when it comes to resolving collection disputes.

A new study by San Mateo, Calif.-based Aceva Technologies finds that 90 percent of disputes are settled in the customer's favor. Moreover, the average length of time to resolve each dispute is four weeks — time spent mostly on researching what went wrong.

The findings do not surprise Shelley Thunen, CFO of IntraLase Corp., an Irvine, Calif.-based laser-technology provider. In customer disputes, she says, "there is a lot of paperwork going back and forth." Plus, "most companies want to ensure customer satisfaction," she adds, "so they tend to give them the benefit of the doubt."

Given the impact these disputes have on days sales outstanding, however, "finance has to fix the root causes," says Aceva COO Sanjay Srivastava, who blames disputes on the "complexity within the quote-to-cash" process. It's not just the cost of resolving disputes or the impact of inflated DSO on working capital that should concern companies, he adds, but also the attention accounts receivable must pay to "problems that shouldn't exist in the first place."

The findings raise the question: Why spend so much energy on a battle that you won't win? "If you chase down these disputes, it may cost you money," says Srivastava. "But you can't overlook them; you certainly don't want to set a precedent." — Lori Calabro

Losing Battle

89.5%

Disputes focused on large accounts or large past-due accounts

50%

Average time spent contacting customers seeking resolution

90%

Disputes settled in the customers favor

Jumped or Pushed?

The Nasdaq stock market has made no secret of its desire to lure companies from the New York Stock Exchange. Now the Big Board is making it a little easier.

Take the case of Tasty Baking Co. The Philadelphia-based bakery ended its association with the NYSE in October and began trading on Nasdaq after it was unable to comply with new NYSE standards requiring a minimum market capitalization of $75 million, up from $50 million. Company officials had originally agreed to work with the NYSE to come into compliance, but changed their minds over the stringent conditions.

"We were under $75 million in market capitalization at the time," says CFO David S. Marberger. "We submitted a business plan [to the NYSE] outlining how we would get the company to listing standards within 18 months, but until then we would be listed as 'below criteria.'" Moreover, Marberger would have had to file quarterly business plans during that period. "We felt this would distract us from effectively running the company," he says.

Once Tasty Baking made that intention known, however, the NYSE immediately suspended it. Similarly, Nashua Corp., a maker of specialty imaging products, was delisted once it opted not to work with the NYSE to bring its market-capitalization levels into compliance. (A third company, Midwest Air Group Inc., opted to move to the American Stock Exchange.)

For its part, the NYSE maintains that market conditions allowed it to raise the bar. Still, Marberger insists that Tasty Baking is not sacrificing anything by trading on Nasdaq. "Anytime you're in a situation where you have to change markets, you have to realize that you have two good options," says Marberger. "We have no regrets." — Gareth Goh

Socially Unacceptable

Despite occasional indications to the contrary, officers at most firms insist that their companies are upstanding corporate citizens. Now, some investment banks are looking to test the validity of those claims.

Over the past year or so, several marquee investment banks — including The Goldman Sachs Group Inc.; Citigroup Global Markets Inc.; and UBS — have added socially responsible investing (SRI) teams to their sell-side research departments. The aim? To integrate fundamental financial analysis with more mercurial measures like environmental sustainability and social liability.

Admittedly, critics may scoff at these fairly fuzzy metrics. But in a report on SRI published last year, UBS suggested that social risk is tantamount to business risk — and should therefore be duly considered when valuing a business. The report, Why Try to Quantify the Unquantifiable?, offers a framework for analyzing nine broad business sectors in terms of potential corporate social liabilities — things like carbon emissions, pollution, product safety, and human-rights violations. Such liabilities, says the report, "should be viewed as a potential claim on the business, and therefore can be incorporated into standard valuation models."

Michael Moran, a vice president in Goldman's U.S. Portfolio Strategy/Accounting Group, backs the approach. "Even if you're a fundamentals-based investor, you have to think about these issues," he argues. "There are actual hard dollars involved."

And dollars to be made. Management at General Electric Co., for one, hopes to reap the rewards of its recently launched green corporate initiative, a program dubbed "ecomagination." As part of that plan, GE is looking to double its R&D investment in cleaner technologies over the next five years, reduce its greenhouse-gas emissions, and improve its energy efficiency. "Environmental responsibility is not just a negative issue for some companies," notes Moran. "It's a positive one for those that can find ways to develop cleaner products or help other companies make their products cleaner."

Both Moran and Shirley Knott, a London-based director at UBS, say that interest from institutional investors, mutual funds, and hedge funds has fueled Wall Street's curiosity about SRI. Still, the two bankers admit that not everyone shares the same level of interest. Shortly after Goldman's August 2005 SRI report was issued, Moran had three meetings in a row with institutional clients. Their reaction? Recalls Moran: "One client was intrigued, one client was confused — and one client laughed at me." — Edward Teach

Inappropriate Behavior

Some social liabilities:

Carbon emissions

Pollution

Product safety

Human-rights violations

Waste disposal

Bribery and corruption

Respect for privacy

Copyright theft

Source: UBS

Bee the Brand

In November, Strategic Hotels & Resorts unveiled a slick new corporate image, including a bumblebee logo. The new brand isn't designed for customers; it's intended to help the firm market itself to Wall Street.

The branding exercise, completed at the insistence of James Mead, CFO of the Chicago-based real estate investment trust, which owns and manages high-end hotels and resorts, is just part of an effort to unify the firm's message to investors. The gold bee logo, with the word "strategic" beneath, appears on all investment materials. It symbolizes the characteristics of community, hard work, and elegance that Mead sees as the components of the corporate vision. Meanwhile, Strategic Hotels, which conducted an initial public offering in June 2004, relies on the well-established brands of the hotels it owns, including a few Four Seasons and Fairmont properties, to work their magic on consumers. (While Strategic Hotels owns properties under those names, it doesn't own the brands.)

The CFO says creating a brand is just another financial tool in the capital-raising box. "When you don't have a long track record to hang your hat on, how you perceive yourself is very important," says Mead. "The brand helps us understand that, and project it to potential shareholders." Mead hired an outside advertising agency to develop the brand, which cost $100,000 in total.

Investor-relations experts agree that branding is an important part of appealing to investors. "Companies are more and more aware that image is a key factor in attracting investments from Wall Street," says Lou Thompson, president of the National Investor Relations Institute, in Vienna, Va. Branding is about more than just a logo: it's about the reputation that a company builds on the Street, he says. Thompson contends that finance executives sometimes struggle with the idea of branding. "A lot of people on the finance side aren't comfortable with things that are hard to quantify," he says. Yet, strategic CFOs are getting more involved with how the corporate brand is portrayed to investors, he adds.

But branding can backfire if the message doesn't match reality. "There is nothing wrong with using some sizzle to facilitate attraction," says Bob Leahy, general manager of the eastern region of the Financial Relations Board, an investor-relations firm. "But at the end of the day, the numbers speak." — Joseph McCafferty

Reaching for Peace Pipes

It looks like corporate-governance proponents checked their boxing gloves at the door during the 2005 proxy season. With fewer proxy contests, fewer shareholder proposals, and a management push to declassify boards, companies were doing more listening, and investors made progress in their quest for majority voting rights. Now all eyes are on the SEC's new chairman, Christopher Cox, to see if he'll de-emphasize William Donaldson's regulatory push — and possibly raise the ire of shareholders anew. Either way, next season look for stock-option expensing, poison pills, and majority-election promises to top shareholder agendas.